Vertical cross-shareholding: Theory and experimental evidence

Werner Güth, Nikos Nikiforakis, Hans Theo Normann

Research output: Contribution to journalArticlepeer-review


This paper analyzes vertical cross-shareholding, that is, the mutual holding of a minority of shares between vertically related firms. First, we explore the issue in a game-theoretic model and show that cross-shareholding is sufficient to obtain efficient outcomes. We then test the model's predictions in an experiment. Theory predicts the seller decisions accurately but the buyer decisions only to a small extent. Buyers are more likely to agree on cross-shareholding than sellers in an attempt to avoid the winner's curse. Cross-shareholding occurs more frequently than predicted, and it increases the likelihood of trade.

Original languageEnglish (US)
Pages (from-to)69-89
Number of pages21
JournalInternational Journal of Industrial Organization
Issue number1
StatePublished - Feb 2007


  • Cross-shareholding
  • Experiments
  • Vertical merger
  • Winner's curse

ASJC Scopus subject areas

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering


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